Royal Bank of Scotland and Fred Goodwin look set to avoid High Court trial as investor group gives nod to settlement offer

I am City A.M.'s chief City reporter, mainly covering banks, Brexit, M&A and deals. I also cover media stories and enjoy interviewing big figures from the business world. I previously worked for Press Gazette and Mail Online.

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The Royal Bank of Scotland trial was due to begin last Monday (Source: Getty)

William Turvill

Royal Bank of Scotland and former chief executive Fred Goodwin appear set to dodge a High Court trial, with an investor group indicating its acceptance of a settlement offer.

The 14-week legal battle was due to commence last Monday but was delayed to allow for settlement talks between the lender and the shareholder group. RBS made an 82p-per-share offer to the 9,000 shareholders bringing the action.

The Royal Bank of Scotland Shareholder Action Group indicated to members on Saturday that it had accepted this as a reasonable offer.

It is understood that investors representing at least 70 per cent of the £520m claim – the threshold to make the acceptance decision binding – have accepted this offer, including institutional investors, retail platforms and some individual retail shareholders.

Crucially, the claim is being funded by a “substantial claimant in the action” who has decided to accept the offer and is “no longer willing to fund the action”. This is believed to be a reference to Trevor Hemmings.

Therefore, if individual retail investors want to force through a trial, and see Goodwin appear in court, they will need to find alternative funding for the legal costs.

The shareholder action group letter to claimants revealed that investors had been seeking damages of between 92p and 234p. It also disclosed that between 40 to 45 per cent of investors’ proceeds is likely to be taken off their damages for legal and other costs.

The shareholder group said that while the case against the bank in court is “strong”, there is a “big risk” of losing the trial against from individual directors who are defendants.

If the liability trial is won, there is then a “substantial” chance the bank could appeal the result. In addition, if the liability trial is won, there would need to be a separate hearing to decide on damages.

“The longer the case continues, the more cost will be expended in legal fees and other costs, which will result in more deductions from any damages award,” the letter said.

“Put simply we would have to significantly ‘beat’ the current offer of 82p to put the claimants in the same position as they would now be in, further down the line.”

The investors claim they were misled by the bank on its financial health ahead of a £12bn rights issue in 2008, shortly before it had to be bailed out by the UK government.

The investors claim they were misled by the bank on its financial health ahead of a £12bn rights issue in 2008, shortly before it had to be bailed out by the UK government.